For decades, USAID has been a pillar of support for Nepal’s development sector, funding crucial programs in health, education, infrastructure, and governance. The recent cessation of its funding has sent shockwaves through the country, especially among non-governmental organizations (NGOs) that have long relied on this support. While the withdrawal presents serious challenges, it also opens a window of opportunity for Nepal’s government to rethink its development approach and strengthen collaboration with local stakeholders.
Imagine a small rural health clinic in Rukum, Nepal, that provides free maternal healthcare to pregnant women. For years, this clinic—run by a local NGO—received funding from USAID to offer prenatal checkups, deliveries, and postnatal care. Now, with USAID’s funding frozen, the clinic is struggling to pay its staff and procure essential medicines, leaving expecting mothers in the region without reliable healthcare.
This is just one example of the larger crisis facing Nepal’s NGOs. Many organizations that work in areas such as education, women’s empowerment, environmental conservation, and disaster relief are now at risk of shutting down or significantly reducing their operations. Thousands of NGO workers face job losses, and the communities they serve are left vulnerable.
According to reports, USAID’s funding freeze has already led to mass layoffs in the global aid sector, with Nepal being one of the many affected countries. The absence of this funding threatens to roll back years of progress in poverty alleviation, gender equality, and community development.
The shutdown of USAID funding has sparked an important conversation in Nepal’s political circles: How can the country reduce its dependency on foreign aid?
For years, Nepal has relied heavily on international donors to fund social programs and infrastructure projects. The sudden withdrawal of USAID has forced the government to explore alternative funding sources, reassess its policies, and take greater ownership of its development goals.
One immediate concern is ensuring that essential services do not collapse in the absence of foreign aid. The Nepalese government now faces the challenge of reallocating its budget to support key sectors like health and education. However, this situation also presents an opportunity for Nepal to strengthen regional partnerships and tap into alternative sources of funding, such as South-South cooperation with neighboring countries like India and China.
Culturally, USAID-funded projects have played a significant role in preserving Nepal’s rich heritage. For instance, in the Kathmandu Valley, USAID-supported programs helped restore ancient temples damaged by the 2015 earthquake. Without this funding, ongoing restoration efforts may stall, putting historical sites and Nepal’s cultural identity at risk.
Socially, the shutdown is exacerbating inequality. Many marginalized communities benefited from programs promoting women’s empowerment, youth education, and disaster resilience. Take, for example, a scholarship program that enabled girls in remote areas to attend school. With funding now uncertain, many of these young girls may be forced to drop out, widening the gender gap in education.
Additionally, thousands of local NGO employees—health workers, social mobilizers, and educators—are now facing unemployment, which could lead to increased poverty and migration in search of better opportunities.
Despite these challenges, the funding crisis also presents a unique opportunity for Nepal to rethink its development model. Here’s how the country can turn adversity into growth:
- Nepal’s federal structure allows for greater autonomy at the municipal and provincial levels. By strengthening local governance, authorities can better understand community needs and allocate resources more efficiently. A successful example of this is Nepal’s Local Adaptation Plans of Action (LAPAs), which have enabled local governments to take charge of climate adaptation initiatives with direct community involvement.
- Nepal has a proven track record in community forestry, where local groups manage forests for sustainable use and income generation. Expanding such models to other sectors, like agriculture and tourism, could reduce reliance on foreign donors while fostering economic resilience.
- Rather than depending on a single donor, Nepal should explore alternative partnerships. Engaging the private sector, mobilizing diaspora investments, and seeking funding from emerging donors such as the Asian Infrastructure Investment Bank (AIIB) or BRICS nations could provide new avenues for development financing.
- Partnering with the private sector can drive innovation and efficiency in service delivery. For example, Nepal’s telemedicine projects, initiated by private tech companies and NGOs, have expanded healthcare access in remote areas. Similar models can be applied to education and entrepreneurship programs.
- By investing in training and capacity building, Nepal can empower its local NGOs to operate independently. Programs focusing on grant writing, financial sustainability, and project management can help organizations secure alternative funding and maintain their impact.
The shutdown of USAID funding is undeniably a setback for Nepal’s development sector, but it also serves as a wake-up call. Instead of viewing it solely as a crisis, Nepal can use this moment to reimagine its approach to self-reliance, governance, and economic sustainability.
By strengthening local governance, embracing community-driven development, and diversifying funding sources, Nepal has the chance to build a more resilient and independent future. The road ahead is challenging, but with strategic planning and strong collaboration, Nepal can turn this crisis into a catalyst for long-term growth and stability.
By Shreedeep Rayamajhi
